Monday, October 12, 2020

MMT and Tax : a new narrative – Jim Osborne

I have been arguing within the Scottish Currency Group recently, through a number of OPs and comments, that the MMT narrative about taxation is incomplete and presents a serious weakness in the MMT proposition. I want to explain why this weakness needs to be addressed….

 Back to the Noble Lie. 

Progressive Pulse
MMT and Tax : a new narrative – A guest post by Jim Osborne


Senexx said...

I am not convinced that this returns us to the noble lie, the Samuelson myth

“A sovereign government with its own currency does not require that taxation funds all public spending and in most circumstances the revenues from taxation cannot be sufficient to fund all the public spending that a society needs. Any shortfall can ALWAYS be covered by the ability of a sovereign government to create new money, subject only to the limitation imposed by the real capacity of the economy, which is limited by the physical resources available to it”

Care to elaborate?

Tom Hickey said...


OK, half a noble lie.

"A sovereign government with its own currency does not require that taxation funds all public spending"

Taxation doesn't fund any public spending. Taxation is independent of spending and occurs after the spending. Taxation only "funds" spending in an accounting sense post hoc. Taxation is not a source of funds in the way that most people understand it, that is needed for spending or paying off debt. MMT shows that to be false and the author knows and is not comfortable letting people know that. He wants people to think something other than the institutional reality that MMT makes clear.

The point of the post is that the the author clearly wants taxpayers to feel that they are funding government rather than taxes simply being imposed to create demand for the currency so as to move private resources to public use and to control inflation.

Of course, Warren's business card and revolver metaphor doesn't help here, and creates exactly the feeling in many that the author is concerned over regarding general knowledge of MMT>

So he is not advocating as blatant a lie as asserting that taxation is needed before spending. But he is concerned about telling it like it is. This is not exactly telling the truth about what happens.